Countercyclical Capital

The view from Charlie Palmer's Steakhouse is terrific. Look out the massive picture windows and there, above the leafy trees that stretch nearly to the top of the hill, the Capitol dome glistens, refulgent in the late summer heat. Your heart skips a beat, and not just because of the size of the check.

The view inside Charlie Palmer's Steakhouse is also upbeat. Nestled at the foot of the Senate side of Capitol Hill, the place is a magnet for lobbyists and legislators. During the Friday lunchtime when I pay a call, the dining room is a little more than half full, but then it's Friday, when members of Congress have already gone home for the weekend. "Some of the folks we get on Friday," says Lamar, the bartender, "are bummed that they have to be here. Not here at the restaurant; here in D.C."

On this Friday, however, neither the staff nor the patrons look bummed. The nation may be plunged into the deepest recession in decades, but Charlie Palmer's on Capitol Hill is having "a heckuva year," says Philip Gates, its general manager. "We're growing at the same rate we did in 2006 and 2007."

"Business is actually better than last year," confirms Lamar as he pours my second Anchor Steam. Not all business in Washington, of course: Lamar is actually an architect who can't find an architecture job in the current economy. But at least he can make some money bartending at Charlie Palmer's. In the shadow of the dome, all is well.

And it's in the shadow of the dome, so to speak, that official Washington lives and works. If you spend your life helping businesses and banks escape gratuitous federal regulations or fend off intrusive legislation, or if you work on the Hill or at a federal agency and need to grasp the arguments against gratuitous regulations or intrusive legislation, can you spend the recession shuttling between Charlie Palmer's and The Palm (another classic lobbyist's haunt, off the K Street corridor) and get the sense deep down inside, in that place where good food and good drink come cheerily to rest, that despite those economic statistics, everything is basically fine?

Why the hell not?

Washington, after all, is America's countercyclical metropolis, the federal government being the only entity on the continent to have massively increased its spending in the midst of the most serious recession since the 1930s. Unemployment in the entire D.C. metro area, which includes not just the District but also such high-end suburbs as Maryland's Montgomery County and Virginia's Fairfax County, is just 6.2 percent -- the lowest of any major metropolitan area in the land.

Fifteen cents of every federal dollar is spent in metro D.C. Not everyone benefits from this, of course. A connection to the feds is the key to success. At the rarified level of the major D.C. law firms, my attorney neighbor tells me, firms that specialize in regulation, like the venerable Covington and Burling, are doing just fine, while other firms that handle the nongovernmental affairs of major businesses have deferred new hires for up to three years.

At times, the importance of proximity to government is actually physical. Sale prices for homes on Capitol Hill have held steady or even risen this year, says one friend who works on District finances, while they have largely declined elsewhere in D.C. Dean Gold, who owns Dino, one of my favorite neighborhood restaurants (up Connecticut Avenue in Cleveland Park, far from haunts of expense-account lunches), reports that most restaurants seem to be down about 10 percent from 2008.

The greatest disparity, of course, is between Washington's professional class, which is largely white, and its poor and working-class residents, who are predominantly nonwhite. Unemployment in the District proper stood at 10.9 percent in June, higher than that of 42 states, but the racial disparities within that 10.9 percent are huge. In the first quarter of 2009, white unemployment in the District stood at just 3.6 percent. Black unemployment stood at 15.5 percent.

But the struggles of Washington's nonwhite poor are nowhere in evidence as you look through Charlie Palmer's picture windows or jockey for a seat at the bar at The Palm. I chose those two restaurants not only because they're places where power chows down but because each is a part of a national chain, with high-end outlets in other cities. How was business, I wondered, compared to their counterparts in other, less federally stimulated, climes?

"Operations in other cities have different cycles," says Gates, Charlie Palmer's Washington manager. Some of the chain's new restaurants, like all newer businesses in a downturn, are struggling, he adds. But D.C. is thriving.

"D.C. got lucky this year, with all the excitement surrounding the new president," says Andrew Freeman, who handles public relations for The Palm chain, which has restaurants in 21 other U.S. cities. "Business is better than in other markets."

It's not just visiting Obamaites, says Ted Swigert, who manages D.C.'s Palm. "We have a fiercely loyal clientele," he says. "We've been here for 37 years. Our lunch crowd -- you know 80 percent of them by name."

The Prospect, of course, couldn't simply accept the unverified claims of restaurateurs, which is why it was necessary to test those claims through direct observation in the field. And, as the Prospect has long been a friend of good social science, I am obliged to report on a methodological quirk in my observations: As both Charlie Palmer's and The Palm are costly restaurants, my editors suggested I not actually order meals -- a condition, since I needed to hang out at both establishments and talk to staff, that required I run a bar tab while incurring no expenses on solid food as such.

And sure enough, after downing a couple of beers at Charlie Palmer's and then switching to glasses of chardonnay or some white wine or other at The Palm, it was clear that both places, The Palm in particular, were doing just fine. The bar was packed, and most of the tables were in use (for dining). Tim, the bartender, seemed to know at least seven or eight of the people at the bar, one of whom, the guy next to me, was not only a regular but had his picture on the wall alongside the pictures of thousands of other patrons, only a few of whom I could actually discern -- fewer, in fact, the longer I stayed. One of them sure looked like Don King, and probably was Don King since hardly anyone looks like Don King except Don King. There were lobbyists and lawyers and a lot of nice people, and everyone, not to mention business itself, was doing fine.